Earlier this month, Colorado dispensary chain Terrapin Care Station sued Broomfield County and City Clerk Erika Delaney Lew, as well as four groups of competing applicants, alleging that Broomfield allowed business entities to file multiple applications in the lottery under different names in order to increase their chances of getting drawn.
Under the rules of Broomfield's lottery system, no person or entity can apply for more than one license at any location in the city. The four groups cited in Terrapin's lawsuit filed nearly identical applications, but with different legal names attached to the documents.
"After reviewing applications, we determined that numerous entries have the same owners. This behavior violates Broomfield’s ordinance and creates an uneven playing field," says a statement from Terrapin. "Companies like ours played by the rules and developed significant community impact plans to benefit the city of Broomfield. Certain entities are trying to game the system to give them an unfair leg up in the license selection lottery."
Terrapin's lawsuit asked for a preliminary injunction to stop the city's October 21 lottery drawing, and it appears to already have made a step in that direction. On October 7, the Broomfield Marijuana Licensing Authority announced that the dispensary licensing process would be paused for a period of no longer than sixty days. Broomfield officials declined to comment on the lawsuit, but did include a statement with the announcement.
"The City and County of Broomfield has received considerable feedback regarding its marijuana licensing process, particularly concerns regarding the attempt by certain affiliated groups to submit multiple applications using different corporate entities. This issue is currently the subject of pending litigation involving the City and numerous applicants," the statement reads.
"The City is in the process of considering administrative regulations to clarify this issue to ensure that the licensing process moving forward is consistent with the City Code, City Council’s intent when it implemented this robust licensing process, and fundamental fairness," the statement continues. "Any dates previously scheduled in the licensing process will be rescheduled. The City will post the new schedule publicly and will directly inform each applicant."
Two of the targets of Terrapin's lawsuit, groups representing Silverpeak and Unity Road dispensaries, didn't respond to requests for comment. But two other defendants say they have nothing to hide, and insist they diligently followed Broomfield's application rules.
"We were very careful and participating in all of the preliminary meetings, and the City was very transparent. There were several people who asked how to go about it, and that's how they answered. We were told this was fine, and we double-checked and tripled-checked," says Yuma Way co-owner Rita Tsalyuk.
Yuma Way, a network of seven dispensaries in the Denver area and one in Michigan, is accused of filing four applications that name different co-owners or relatives. But Tsalyuk says that if she, her son or business partners win a Broomfield license, that store will remain independently owned. It would be the first Yuma Way dispensary owned outside of the company, she adds.
Igadi, another Colorado dispensary chain named in Terrapin's lawsuit, is using a similar argument. According to Igadi legal counsel David Michel, each of the five applications that would operate under the name Igadi were submitted by different entities, including one by Igadi itself. However, if any of the four limited companies outside of Igadi win the license, they would pay the company for branding and intellectual property.
"This is not anything new in our economy or the way we do business in America. I had thought previously that Terrapin was a sophisticated business operation. Broomfield held two information sessions where this topic was brought up.... It seems that Terrapin is more interested in preventing competition to its Boulder locations than in engaging in the process the City created," Michel says in a statement.
Broomfield was alerted earlier this year that four business groups might be responsible for half of the 26 dispensary applications, but told the Daily Camera in September that despite having similar operations, the strategy technically complied with the rules as long as the names on the applications were different. Terrapin announced its lawsuit days later.
Broomfield is one of the few Denver suburbs that has yet to allow commercial marijuana sales. Voters approved allowing recreational pot shops in the November 2020 election, but the town of 75,000 is only issuing three dispensary licenses initially, with two more potentially handed out after the first year of sales. With just a handful of new dispensary licenses in Denver and a social equity requirement attached to all new marijuana business owners in the Mile High City until 2027, the suburbs have never been more attractive.
"It's hard to get anything new in Denver, so people are doing whatever they can outside of it," Tsalyuk says. "I don't necessarily view Broomfield as extremely lucrative, but it's close enough to other municipalities, and there's definitely a need there."
Terrapin is still moving forward with the lawsuit and awaiting official responses from the five parties that were served. In the meantime, the company is celebrating Broomfield's decision to wait on the lottery.
“We appreciate that the City of Broomfield has paused its licensing process to reconsider its decision to move forward in violation of its ordinances. People who tried to game the system by submitting multiple applications through shell entities should be disqualified," Jordan Factor, an attorney representing Terrapin says in a statement. "Terrapin remains committed to obtaining judicial relief in the event the City persists in its present, unlawful course.”